Well, I like to think I'm above average.
The basic of anime licensing is that the studio whose name you see on the DVD case is not the creator, but a studio who pays the Japanese creators for the right to translate, dub into English, and release an anime in another country. For instance, Gundam was created by Sunrise, but is licensed in the U.S. by Bandai Entertainment.
Now, not every series in Japan is brought to the states by a licensing studio. What some fans do is they get raw footage of these series and add subtitles in English, then make them available for download off of the internet via BitTorrents, Kazaa, or other file sharing programs.
The sticking point is when for one reason or another a fansub group doesn't stop making the files available after a series is licensed and brought stateside. Once that happens, the subs become illegal bootlegs.
Hope I've made things clearer.